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 Post subject: Fraud, theft and corruption - COPE exposes
 Post Posted: Thu Feb 15, 2007 2:33 pm 
COPE exposes - corruption had cost Rs. 150 billion to the country
Fraud, theft and corruption

COPE disclosed to Parliament that corruption and malpractice had risen to dizzy heights in 26 state institutions including the Bank of Ceylon, the Ceylon Electricity Board, Ceylon Petroleum Corporation and the National Water Supply and Drainage Board. Some private companies are indebted for a sum of Rs 7000 million to the Central Bank. Mercantile Ltd. has evaded payment of Rs 5,780 million to the bank. The amount of non-performing loans granted by the bank was Rs. 13 billion, COPE said.

@ Sunday Standard, Sunday January 21, 2007

The report presented to parliament by the Committee on Public Enterprises (COPE) exposed corruption, fraud and mismanagement in many of the state institutions.

After presenting the report Wijeyadasa Rajapakshe, Chairman COPE, in his closing remarks requested parliament to open COPE sittings to the media.

"The people of our country have a right to know what happens to the investigations carried out by COPE and the Public Accounts Committee (PAC). Therefore, by way of a resolution I put it to parliament to take steps to change the standing orders, so that the media can be allowed to cover the proceedings of COPE and PAC in future."

The Speaker then said that a committee was already in place to look into this matter.

Rajapakshe, continuing his closing remarks, said that institutions like Sri Lankan Airlines and Sri Lanka Telecom could not be included into COPE's scope even though the government owned 51 per cent of the shares.

"The people of this country hold a majority stake in these institutions. They have a right to know how these institutions are run. I ask this parliament to introduce legislation and bring in all the institutions, where the government holds shares of more than 25 per cent, into the scope of COPE and PAC. If you fail to do so, you as politicians are failing in your duty to the people."

Here are some of the institutions that came under the microscope, along with some of the COPE findings and observations.

Central Bank of Sri Lanka (CBSL)

The caretaker of the country's financial system was found wanting in its supervision of finance companies.

The bank which constantly posts notices to the public about non-licensed finance companies failed to bring these companies into the legitimate fold. Also, 80 per cent of the registered finance companies who are non-performing are yet to face the legal brunt of the bank.

The bank was also found to be lethargic in recovering loans amounting to Rs. 7000 million advanced to bankrupt finance companies.

COPE recommended that the governor take steps to appoint a committee to investigate the affairs of pyramid schemes and inquired into the payment of US $ 300,000 to foreign bank for arranging a loan of Rs. 1 billion.

Telecommunication Regulatory Commission (TRC)

Rs. 22 million was paid to a company based in the US for corporate plan that was below standard and had to be rejected by TRC. This payment was made without approval of the commission.

Breaching statutory laws and regulations, TRC had invested a sum of Rs. 170 million in treasury bills and fixed deposits without treasury approval. TRC had bought the treasury bills without endorsing TRC's name.

Since 31 December 2004, Rs. 19.8 million is outstanding, yet to be recovered from frequent users other than the government.

Apart from failing to submit its annual report for 2005, TRC had paid additional allowances and other financial benefits amounting to 26.7 million over a period of three years.

Ceylon Electricity Board

COPE findings revealed that the internal audit division had been weakened with a design to prevent the disclosure of corruption and misappropriations. The audit officer had informed COPE that relevant documents and files were not submitted by relevant departments. COPE gave directions to take disciplinary action against such officials.

The mismanagement, inefficiency and corruption of the board are apparent. The CEB debt position is around Rs. 15 billion.

Among the board of directors were those facing charges of various fraudulent dealings, not withstanding they remained in the board. The board was dissolved for this, and also for the fact that bureaucrats and trade unions had on many occasions surpassed the directors.

Bank of Ceylon

Non-performing loans amounting to Rs. 12 billion had not been recovered and COPE felt the bank should adopt appropriate steps to do so. COPE was not satisfied with the banks decision to recover these loans without interest.

Loans amounting to Rs. 314 million and overdrafts amounting to Rs. 300 million have been granted to International Grossers Alliances by obtaining security of only Rs. 40 million.

Ceylon Petroleum Corporation (CPC)

COPE reported that the CPC has six hundred employees in excess of the approved cadre. Also, appointments of certain individuals into managerial vacancies had been shady and not in keeping with principles of good governance.

The transfer of 8.2 acres of land at Bloemendhal road to Lanka Marine Services was called into question by COPE.

CPC had transferred Rs. 900 million to its Thrift Society without proper approval which is, according to COPE, in violation of monetary laws and financial regulations.

National Savings Bank (NSB)

An important recommendation to NSB from COPE is that the bank takes steps to improve its accessibility in rural areas, especially with regard to loan facilities.

The bank was also asked to explore the possibilities of opening up collection centres in the Middle East and Italy to accommodate Sri Lankan migrants.

Sri Jayawardenapura General Hospital

The COPE was dissatisfied with regard to the explanations given by the hospital authorities in relation to the construction of the three storied buildings with a series of patent and latent defects.

It was revealed that a sum of Rs.36 Million is required to do the rectification work.

COPE attributes this state of affairs to the total negligence of the Hospital Management and the Ministry of Healthcare and Nutrition.

Board of Investment (BOI)

The BOI had been functioning for a long period without a corporate plan and COPE said it was highly inappropriate to run such an important institution without having properly adopted corporate and action plans. COPE expressed its dissatisfaction about the conduct of the officials of the BOl who made an attempt to mislead the Parliament by tendering false/bogus documents representing them as a corporate plan.

COPE also noted that the BOI occupies several floors at the World Trade Centre paying a rent of Rs.9 Million per month whilst having their own building which is idling since 1999.

COPE also expressed its concern over an agreement between BOl and MERBOK MDF Lanka PVT Limited with the undertaking to reimburse the electricity tariffs without obtaining the approval of the Board of Directors or the Cabinet. The company was given unprecedented and extraordinary concessions to reimburse tariff increases by the CEB and the BOI also undertook to reimburse the imposition of any custom duty by the Indian government out of public funds.

COPE is of the view of that the Ministry and its Secretary has failed to perform their duties in overseeing financial controls of the BOI. "Their failure to monitor the overall performances of the BOl has greatly affected the economy of the country in an adverse manner," the COPE report said.

The BOI has also failed to monitor imports under the BOI banner and it has employed only 40 employees to monitor 50 per cent of industrial imports whereas the Sri Lanka Customs Department has employed about 5000 employees to monitor the balance 50 per cent. The report said that the inadequate monitoring of imports under the BOl banner has created an adverse impact in the economy of the country since such imported items go to the local market at lower rates, which bankrupts the local industrialists and merchants who are engaged in lawful business activities.

COPE also discovered that the Government has lost a colossal amount which was due, by way of stamp duties since the deeds in relation to the immovable property developed under the BOl banner had been under-valued contrary to the relevant Revenue Acts.

The Officials of the BOl were not in a position to furnish COPE with statistics about imports and exports under the BOl banner.

COPE also discovered that some of the companies registered in the BOl had imported Yellow Corn and Soya bean on the pretext of animal feed and had released them to market for human consumption. This had been going on for a considerable period of time. "As a result the local farmers have been greatly and adversely affected causing enormous losses to the national economy," the report said.

COPE strictly recommended the government to take appropriate action to monitor the imports and exports by BOl Companies by a responsible organisation such the Sri Lanka Customs Department.

Airport and Aviation Services Limited (AASL)

COPE reports that AASL had failed to call audit committee meetings for a considerable period since 2005.

COPE also discovered that AASL had had paid a sum of Rs.7 Million for a plot of land without signing legal documents and also without the approval of the Board. It was further noticed the said payment had been made contrary to the legal advice given by its Legal Department.

National Water Supply and Drainage Board (NWS&DB)

The Board had spent Rs. 460 million on an IT project which commenced in 2004, but the project is yet to be completed although the scheduled period was two years.

It was also discovered that audit and management committees have not been appointed for a long period.

Non revenue water supply has gone up to 44 per cent in the whole island and in the city of Colombo alone it's at 51 per cent. The reasons COPE received were leakages, theft and meter errors. This wastage amounts to over Rs. 1700 million in public funds annually.

The amount of bad debts had gone up to Rs. 494 million and no positive action had been taken to recover them.

COPE noted that The Board had failed to adhere to the accounting standards and that there were serious lapses and distortions in accounts.

State Mortgage and Investments Bank (SMIB)

COPE observed that the bank's non-performing loans had increased to such an extent as to limit the bank's progress.

It also observed that there was a lack of documentary evidence for audit purposes in respect of long term loans that remain un-recovered for four to ten years.

The COPE report revealed that there were financial irregularities amounting to Rs. 25 Million since 2004.

State Engineering Corporation (SEC)

The SEC had outstanding debts of Rs. 335 million which was due exclusively from government institutions and another sum of Rs. 473 million from the private sector.

Also, the SEC had failed to answer 25 audit queries within the last three years.

People's Bank (PB)

COPE expressed its concern over the bank's percentage of non-performing loans, which is very high when compared with other banks.

The bank had also failed to recover loans amounting to large sums of money.

COPE said the bank should take steps to regularize the difference of accounts in the book balances and physical balances and to rectify its annual reports in which incorrect facts are given with regard to the writing-off of non-performing loans.

MILCO (Pvt) Ltd.

COPE wants MILCO to explore the possibilities of recovering a sum of Rs. 348 million due from the Government.

The report said the organisations accounts needed to be regularised as well.

Land Reform Commission (LRC)

COPE revealed that the former Chairman of the LRC has accepted a sum of Rs. 7.1 million from people with the undertaking to alienate certain lands without proper approval. The said amount is lying in a 'current account'.

COPE also discovered that certain officials had given land without entering into any lawful agreements.

In its report COPE said that LRC had spent Rs. 21 million on the installation of a computerized data bank, "but it appears it was not completed due to the lack of due diligence of the LRC."

Samurdhi Authority of Sri Lanka (SASL)

COPE had come across an unidentified amount of Rs. 62 million in the books tabulated under 'compulsory savings' of which the officials were clueless.

The micro-finance institutions functioning under the SASL were not authorised by the Central Bank.

COPE also discovered that SASL had failed to recover a sum of Rs. 5.5 million from loan defaulters, as pointed out by the Auditor-General.

Furthermore, an investment of Rs. 4.7 million in a fruit export project at Galgamuwa was inquired into. It was found that the relevant files had been taken over by the Presidential Investigations Unit.

Sri Lanka Ports Authority (SLPA)

COPE was alerted by the Auditor-General to discrepancies in SLPA accounting.

SLPA was guilty of, in the absence of a Finance Director, giving incorrect information to auditors in 2005. It was observed that proper accounting standards were not kept and this frustrated the auditors who reported to COPE.

The SLPA had spent Rs. 234 million as a consultancy fee to set up a computer system that never materialised.

Urban Development Authority (UDA)

COPE observed that due to increases in administration expenses, operational losses of the UDA had increased in 2005.

COPE noted that the accounts were not up to the required standards and the subsidiary accounts had not been distinctly included in the balance sheet.

Also, The UDA had not taken steps to recover Rs. 139 million due from the rest houses.

 Post subject: Is Sri Lanka really ready for the COPE findings?
 Post Posted: Thu May 24, 2007 3:59 am 
Is Sri Lanka really ready for the COPE findings?

Ceylon Petroleum Corporation (CPC) was a monster devouring public funds. A CPC land of 8.2 acres in extent adjoining the harbor had been sold for Rs. 64 million through the PERC with the signature of former President Chandrika Kumaratunga. In this transaction, there is a loss of over Rs. 65 billion. This amount is one-seventh or eighth of our national revenue.

@ DM / LL Thursday, May 24, 2007

The January revelation that corruption had cost Rs. 150 billion to the country was received with both contempt and ‘political commitment’. There was hope and gleeful faith that all responsible would be brought to book. But four months after the COPE report was submitted to Parliament action is strangely stayed. Not a single official has been dealt with since January. It’s simply that nothing has happened since January to substantiate any sentiment beyond shock.

COPE disclosed to Parliament that corruption and malpractice had risen to dizzy heights in 26 state institutions including the Bank of Ceylon, the Ceylon Electricity Board, Ceylon Petroleum Corporation and the National Water Supply and Drainage Board.

Some private companies are indebted for a sum of Rs 7000 million to the Central Bank. Mercantile Ltd. has evaded payment of Rs 5,780 million to the bank. The amount of non-performing loans granted by the bank was Rs. 13 billion, COPE said.

COPE Chief said the Ceylon Petroleum Corporation was another monster devouring public funds. Lanka India Oil Company (LIOC) had acquired 58 filling stations by creeping through loopholes in the agreement with the CPC to lease 100 stations countrywide. Lanka Marine Service Ltd., a subsidiary company attached to the CPC, had been sold at one billion rupees. The real value of this company is Rs. 2.4billion. Apart from that, a land of 8.2 acres in extent adjoining the harbor had been sold for Rs. 64 million through the PERC with the signature of former President Chandrika Kumaratunga. In this transaction, there is a loss of over Rs. 65 billion. This amount is one-seventh or eighth of our national revenue.

At the National Water Supplies and Drainage Board, there was wastage of 51 percent of running water. The highest water wastage in the Asian region is reported in Sri Lanka. In Japan, this rate is only seven percent.

Serious charges were levelled against the Central Bank. The CB was accused of ‘neglect, failure and lethargy’ in recovering Rs. 7 billion. ‘It is the fault of officials in failing to recover these funds. The Central Bank Governor has agreed to submit a report. If they don’t do it the government will have to look at the next alternative’. The government is yet to identify an alternative.

However, the political maneuverings that the country witnessed are far too fresh in their minds to expect real action against similar findings. From the cross overs to the big names implicated in the findings, many predicted this very end to the COPE findings. Many political analysts believed this fate would befall the exposures. It was not difficult to see where the balls were rolling, around the same time as the findings were released.

None of the main Political parties in the country can deny knowledge and connivance with corrupt dealings. There has been more than any one individual party’s share of blame to deny the charges. Hence, it was never in doubt that the COPE findings would get stuck at some point.

But it becomes imperative that the government realize the long term impacts of failure to nip corruption in the bud. Every single attempt by the administration to discourage any move to arrest the situation will have serious implications. These implications vary from losing ‘precious’ foreign aid, to losses locally.

In that sense, the failure by the government to extend any kind of support towards the COPE findings will prove a necessary indictment on the path it is taking. The refusal to prioritize ending corruption sends a serious message to both the local tax payer and the donor community. Already charged with several counts of corrupt deals the Rajapaksa administration can’t afford the silence over the matter.

The COPE Chair was insistent on government support to move beyond the findings. “This is a serious level of corruption. The government has a lot of plans for development and must arrest this situation before we go in to those plans. This is why the President wanted this situation under control. We need to have better machinery in place to carry out development plans,” he said.

The question in this scenario is if the country is ready for any real action against corruption. Much remains undone till we can justify the findings with sufficient political will to mitigate corruption. Has any one political Party shown any real commitment towards this end? In the absence of even the Opposition UNP launching any concrete plans to arrest the situation, the commitment of any political entity would remain a mere point of argument.

The UNP has continuously failed to launch any effective program of action and oversee the work of the government as is required of a good opposition. Increasingly falling far behind the more effective programs carried out by the JVP, the UNP is fast earning its reputation for a lazy, lethargic opposition. The increasing irrelevance of the UNP in the political equation has serious political implications to both the UNP and the country at large.

The UNP simply continues to prove what has now become its permanent side of the Well of the House. It is almost as if the UNP enjoys being the Opposition. It won’t be too long before the people get used to the idea as well. That is sadly a more immediate concern for the Party than they wish to admit to.

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